E-commerce industry: Survival of the fittest ft. DailySocial.id - Part 2

In this article, TFR talked to Dailysocial.id CEO Rama Mamuaya about the e-commerce industry from media perspective. Dailysocial.id is a media that covers tech industry news. Click here to read part 1.

At this moment, Indonesia has 4 unicorn start-ups – Go-jek, Tokopedia, Traveloka, and Bukalapak. Aside from those 4, the number of e-commerce industry players continues to grow. In recent years, Shopee, Alibaba, and JD have entered the market with promising investment. 

It sparks a question: How long will the e-commerce concept last before it becomes obsolete?

Before e-commerce existed, department store that sells ‘everything’ holds the crown. Take, for example, Sears, the ‘everything’ store which filed for bankruptcy last month. The ‘everything’ store concept is similar to what e-commerce platform is doing right now, only with a different medium. 

“10 years ago, e-commerce was a new concept and it is all over the place now. 10 years later, it might be virtual store. Who knows, Amazon might come up with new innovation,” said DailySocial.id CEO Rama Mamuaya said. He continued, “The strongest e-commerce is the one that will shape the industry. Sooner or later it will become obsolete. You can adapt to the condition or invent the future like Apple. Apple does not compromise with the market. They set the trend.”

Being a trendsetter is only possible if the company knows exactly what the market needs. Like Henry Ford said, ‘If you ask the customers what horse they want, they’d say faster horse.’ Or as DailySocial.id CEO Rama Mamuaya put it, “The market knows they have problem, but they don’t know what the solution is. It’s like you go to a doctor: you tell the doctor your symptoms. Doctor then prescribes you the medicine. You don’t ask for the medicine.”

While Apple’s philosophy on being the trendsetter is every tech company’s dream, one has to understand that being a trendsetter requires a deep understanding of target audience. In order to do so, it requires a lot of research, observation, and experiment. Knowing what the market needs means identifying problem and coming up with solution.

For instance, Amazon testing out drone delivery to cut down cost or Go-jek trying out the pay later option. Every e-commerce company has to experiment before assuming whether the strategy works or not. 

“When start-ups stop experimenting, they will stop growing. When they stop growing, they’ll die,” said Mamuaya. “Before Steve Jobs passed away, he said that Apple is the largest start-up in the world. As a single organism with 30,000 employees around the world, there are small teams within the company. It’s the same with Google. G-mail team is responsible for enhancing the feature, the look. It’s a group of small teams doing specific thing but united by 1 vision – driving innovation in products.” 

Of course, you can call yourself start-up forever. Sometimes people stop trying when they grow older and they are going to retire. They don’t want to learn new things. That’s dangerous.

Perhaps the most important factor to survive in the cutthroat industry is providing impeccable experience to customers. It is, according to many, the millennial currency of success. What makes an e-commerce stand out, according Mamuaya, is the level of experience from product search, website navigation, payment structure, logistics, customer service, and features. “It’s the things you can’t see that matter,” Mamuaya added. 

Many e-commerce are focusing on promotion and discounts to acquire market share. That strategy will hurt the company in the long run. “The metric is usually traffic and growth market value (GMV), but the most important things are return on investment (ROI), customer acquisition cost (CAC) and lifetime value. How much do you spend to get a customer and do they come back to your e-commerce?”

“Say you need Rp10,000 in advertising to acquire a customer who spends Rp100,000 and you give them Rp20,000 discount so they pay Rp80,000. You are already losing Rp30,000. The customers then fly away after the discount is over. You can get Rp1 trillion but you spend Rp1.5 trillion on marketing. What’s the point?”

Price war usually doesn’t end well for companies. J.Crew, GAP, and Banana Republic have been the victims of giving out too many discounts. It creates a mindset of ‘why pay a full price when there’s always discount?’ 

Another ongoing trend in the tech industry is customisation. It is an elevated customer experience. While it is more difficult to implement in ‘everything’ e-commerce marketplace, it is more applicable in fashion e-commerce. With ‘everything’ store, you go there to find things you currently need. Customisation won’t do well unless it is a specialised store. 

“The bigger you are, the more you want to sell,” said Mamuaya. “There’s an e-commerce that focuses on baby products, but they are starting to sell powerbanks and laptops. The reason is that 95% of their visitors are women. Women don’t just sit around and take care of babies. They need other things but the e-commerce is tailored to serve women.”

Let’s not forget selection and quality of products. A company can have the most sophisticated customer experience, features, offline and online augmentation, and customer service, but if a customer receives counterfeit items, the trust is completely gone. 

Counterfeit items roaming around e-commerce is not rare. E-commerce giants like Amazon and Alibaba are struggling with it. You can find counterfeit books, brand dust bag or shoes on Tokopedia. There has to be strict regulations on what sellers can list on their stores and how many similar products sold on the platform. It’s not official but a lot of people play with e-commerce SEO by setting up several stores. If a customer has to scroll through pages of similar products, it’s already a loss on shopping experience. Variety is important.

Even photographs of products matter. White background and decent lighting are the most appropriate setting for product photos. Not to forget product descriptions. The more detailed a product description is, the higher chance of purchase – particularly for fashion items.  

In short, a good shopping experience consists of:

1.    Well-designed website – Including hustle free navigation, optimised product search, and customised filter options.

2.    Selection of products – A wide range of products gives more options to customers. E-commerce can’t rely solely on vendors. Having an in-house buyer to curate products is beneficial in the long run.

3.    Quality and authenticity of products – This includes product warranty.

4.    Product details – Photographs, product description, sizing (Indonesians prefer having clothes measurement instead of body measurement). 

5.    Good customer service – Ideally a combination of artificial intelligence and human.

6.    Fast delivery – Even better if it’s free.

7.    Return and exchange policy– The process of exchanging or returning a product has to be convenient. It is better to provide return label instead of asking customers to print out return form.

8.    Offline and online augmentation – Offline has to support online and vice versa. The simplest example is the ‘pick-up at store’ option. Brands usually provide this option free of charge. Bonus, customers walking into the store might purchase other products. 

9.    Innovation – A dedicated team on research and innovation is crucial at this point. Soon, it won’t be just selling and buying; it’s about reinventing shopping experience that is seamless, efficient, and convenient. 

At the end of the day, it’s not just about having large capital to begin with. Sure, it helps boost growth. Shopee has only been around for two years yet the company now second only to Tokopedia in terms of market share. But e-commerce is not just about who bags the biggest investment, it is about who stays ahead of curve and remains in the industry in spite of fierce competition.

As Mamuaya stated, “There will always be new players with new concept. Customised experience is the currency of success. Even though it’s only two words, they hold a deeper meaning. It’s what you can do to improve. It’s a huge thing.”